| HOUSTON-Monday, January 23rd 2017 [ ME NewsWire ]
Fourth-quarter revenue of $7.1 billion increased 1% sequentially
Fourth-quarter GAAP loss per share, including charges of $0.42 per share, was $0.15
Fourth-quarter earnings per share, excluding charges was $0.27
Fourth-quarter cash flow from operations was $2.0 billion. Fourth-quarter free cash flow was $1.1 billion
Full-year cash flow from operations was $6.3 billion. Full-year free cash flow was $2.5 billion
Quarterly cash dividend of $0.50 per share approved
(BUSINESS WIRE)-- Schlumberger Limited (NYSE:SLB) today reported results for full-year 2016 and the fourth quarter of 2016.
Full-year 2016 revenue of $27.8 billion decreased 22% year-on-year, despite three quarters of activity from the Cameron Group that contributed $4.2 billion in revenue. Excluding Cameron, consolidated revenue declined 34%.
Full-year 2016 pretax operating income of $3.3 billion, including the $653 million contribution from the Cameron Group, decreased 50% year-on-year. Consolidated margin fell 658 basis points (bps) to 11.8%. Excluding Cameron, consolidated margin fell 727 bps to 11.1%.
Schlumberger Chairman and CEO Paal Kibsgaard commented, “Fourth-quarter sequential revenue growth of 1% was driven by strong activity in the Middle East and North America, which was largely offset by continued weakness in Latin America and seasonal activity declines in Europe, CIS and Africa.
“Among the business segments, the fourth-quarter revenue increase was led by the Production Group, which grew 5% due to increased hydraulic fracturing activity in the Middle East and in North America land. Reservoir Characterization Group revenue increased 1% sequentially due to strong Testing & Process activity in Kuwait that outweighed the seasonal decline in Wireline activity in Norway and Russia. Drilling Group revenue was flat sequentially as continued strong directional drilling activity in North America land was offset by activity declines in Europe/CIS/Africa and Middle East & Asia. Cameron Group revenue was also flat sequentially, with growth in OneSubsea and Surface Systems offset by reduced product sales from Valves & Measurement and from a declining order backlog in Drilling Systems.
“Pretax operating margin was essentially flat sequentially at 11.4% as margin improvements in the Production and Drilling Groups were balanced by contractions in the Cameron and Reservoir Characterization Groups. In recent quarters, we have managed to stabilize our business from an activity and capacity standpoint, and this has subsequently allowed us to refine and reduce our support structure to reflect current activity and service pricing levels. This has led us to record a $536 million restructuring charge in the fourth quarter. We also recorded $139 million of charges relating to the Cameron integration and a currency devaluation loss in Egypt.
“We maintain our constructive view of the oil markets, as the tightening of the supply and demand balance continued in the fourth quarter, as seen by a steady draw in OECD stocks. This trend was further strengthened by the December OPEC and non-OPEC agreements to cut production, which should, with a certain lag, accelerate inventory draws, support a further increase in oil prices, and lead to increased E&P investments.
“We expect the growth in investments to initially be led by land operators in North America, where continued negative free cash flows seem less of a constraint, as external funding is readily available and the pursuit of shorter-term equity value takes precedence over full-cycle return on investment. E&P spending surveys currently indicate that 2017 NAM E&P investments will increase by around 30%, led by the Permian basin, which should lead to both higher activity and a long overdue recovery in service industry pricing.
“In the international markets, operators are more focused on full-cycle returns and E&P investments are generally governed by the operators’ free cash flow generation. Based on this, we expect the 2017 recovery in the international markets to start off more slowly, driven by the economic reality facing the E&P industry. This will likely lead to a third successive year of underinvestment, with a continued low rate of new project approvals and an accelerating production decline in the aging production base. These factors together are increasing the likelihood of a significant supply deficit in the medium term, which can only be avoided by a broad-based global increase in E&P spending, which we expect will start unfolding in the later parts of 2017 and leading into 2018.
“Against this backdrop and following nine consecutive quarters of relentless workforce reductions, cost cutting, and restructuring efforts, we are excited to restore focus on the pursuit of growth and improving returns. As we navigated this downturn, we have streamlined our cost and support structure, continued to drive the underlying efficiency and quality of our business workflows, expanded our offering through maintaining investments in R&E, and made a series of strategic acquisitions. The combination of these actions has enabled us to further strengthen our global market position during the downturn, which will enable us to maintain and extend our well established margin and earnings leadership in both North America and in all parts of the International markets going forward.
“While earnings growth continues to be a very important financial driver for us, full-cycle cash generation is even more critical, and here, we remain unique in the industry. Over the past two years of this downturn, we have generated $7.5 billion in free cash flow, which is more than the rest of our major competitors combined. Furthermore, we have returned $8.0 billion to our shareholders through dividends and share buy-backs. This clearly demonstrates the full-cycle robustness of Schlumberger, the careful management of our business, and the strength of our executional capabilities.”
Other Events
During the quarter, Schlumberger repurchased 1.5 million shares of its common stock at an average price of $78.21 per share for a total purchase price of $116 million.
On January 5, 2017, Schlumberger announced the acquisition of Peak Well Systems, a leading specialist enterprise in the design and development of advanced downhole tools for flow control, well intervention, and well integrity.
On January 19, 2017, the Company’s Board of Directors approved a quarterly cash dividend of $0.50 per share of outstanding common stock, payable on April 17, 2017 to stockholders of record on February 15, 2017.
North America
In North America, revenue increased 4% sequentially, on increased land activity while offshore declined. Excluding Cameron Group results, land revenue experienced double-digit growth driven by strong hydraulic fracturing activity as stage count increased, and higher uptake of Drilling & Measurements, Bits & Drilling Tools, and M-I SWACO products and services as rig count increased. Revenue on land in the US also posted double-digit growth on higher activity and a modest pricing recovery, while revenue in Western Canada grew strongly from a winter ramp-up in activity in addition to higher sales of artificial lift products. Revenue also increased from year-end WesternGeco multiclient seismic license sales that were, however, muted when compared to prior years. Sales from Valves & Measurement and Drilling Systems declined.
International Areas
International revenue increased 1% sequentially led by strong growth in the Middle East & Asia Area, which was partially offset by continued weakness in the Latin America Area and seasonal activity declines in the Europe/CIS/Africa Area.
Middle East & Asia Area revenue increased 5% sequentially. This was mainly due to strong fracturing and Integrated Production Services (IPS) activity on unconventional land resource developments and increased productivity from land seismic crews in Saudi Arabia. Revenue in Egypt increased from higher perforating, while Qatar grew from increased horizontal logging work. These increases, however, were partially offset by declines in Drilling & Measurements and Integrated Drilling Services (IDS) activity and lower equipment sales in the India GeoMarket as projects were completed and well campaigns delayed.
Revenue in the Latin America Area declined 4% sequentially, mainly in the Mexico & Central America GeoMarket where customer budget constraints led to a sharp drop in overall rig count that impacted onshore and offshore operations, affecting both deepwater and shallow-water projects. Revenue in Mexico also declined following the strong marine surveys and multiclient license seismic sales last quarter. Revenue in Argentina decreased as unconventional resource development work was affected by unfavorable weather conditions and other delays. These declines, however, were partially mitigated by strong drilling and project activity in the Peru, Colombia & Ecuador GeoMarket as the rig count increased by 46% following the rise in oil prices.
Europe/CIS/Africa Area revenue decreased 2% sequentially mainly due to the seasonal conclusion of peak summer drilling activity in Russia and exploration services campaigns in Norway that impacted all Technologies, led by Wireline, Drilling & Measurements, and M-I SWACO. The Sub-Saharan Africa GeoMarket contributed to the Area revenue decline as rigs demobilized and projects were completed, mainly in Angola and Congo. These decreases were partially offset by strong OneSubsea project activity and execution.
Reservoir Characterization Group revenue was $1.7 billion, with 76% coming from international operations. Revenue was 1% higher sequentially due to the ramp-up in activity on the early production facilities projects in Kuwait, higher Wireline perforating activity in Egypt, increased horizontal logging work in Qatar, and increased software license and maintenance sales. These effects were partially offset by the seasonal decrease in Wireline activity in the Northern Hemisphere.
Pretax operating margin of 19% decreased 49 bps sequentially as the increased contribution from software and maintenance sales was more than offset by the decline in high-margin Wireline exploration activities.
Reservoir Characterization Group performance was boosted by a number of Integrated Services Management (ISM) projects, new contract awards, technology deployments, and transformation efficiencies during the quarter.
In Ecuador, Schlumberger provided ISM for Petroamazonas EP and Sinopec to optimize drilling on the Tiputini project. The Bits & Drilling Tools ONYX* polycrystalline diamond compact (PDC) cutter and Stinger* conical diamond element technologies enabled better steerability and stability as well as longer and faster runs. In addition, Wireline Dielectric Scanner* multifrequency dielectric dispersion service directly measured water volume and textural rock information while the Dual-Packer Module isolated the interval for the MDT* modular formation dynamics tester tool. Furthermore, PowerJet Nova* extradeep penetrating shaped charges delivered improved efficiency. The customer reduced total drilling time to 7 1/2 days from the expected 11 days, equivalent to an estimated cost savings of $250,000.
In Egypt, Belayim Petroleum Company (Petrobel), a joint venture between Egyptian General Petroleum Corporation and IEOC Production B.V., awarded Schlumberger Testing & Process a contract valued at $70 million for the engineering, procurement, construction, commissioning, and operation of a facility for the Zohr gas field. The facility, which is expected to be completed 11 months from the date of the award, will provide accelerated production of gas during the first phase of the project. In addition, Testing & Process used a combination of technologies for Petrobel to complete a production test of the first offshore appraisal well of the Zohr discovery in the Shorouk block. Working at a water depth of 1,450 m, the production test string included a SenTREE 3* subsea test tree combined with Muzic* wireless telemetry technology, which activated the SCAR* inline independent reservoir fluid sampling and Quartet* downhole reservoir testing systems. The use of Testing Manager* well testing real-time data monitoring and collaboration software enabled real-time transient analysis and optimization of the well test program.
In Mexico, Pemex awarded WesternGeco a 2,400-km2 full-azimuth ocean-bottom-cable project over the Canin Suuk field in the shallow-water Bay of Campeche. The field is in an area with high prospectivity within their exploration portfolio and requires new seismic technology to provide better imaging due to its salt tectonics complexity. The WesternGeco vessel WG Tasman, newly converted to ocean-bottom operations, will use Q-Seabed* multicomponent seabed seismic technology that has a system designed to ensure uniform coupling in all directions. Acquisition began in 2016 and will continue for approximately one year.
Offshore Norway, Wireline introduced a combination of technologies for Lundin Norway to overcome challenging formation geology and reduce operating time in a well in the Barents Sea. The potential presence of large caves that were not visible via surface seismic imaging required the use of high-resolution imaging in, around, and beyond the borehole. Technologies included the hDVS distributed acoustic sensing (DAS) system using a wireline cable with integrated optical fibers, a Z-Trac* downhole vibrator, and a VSI* versatile seismic imager all within a single toolstring. The data acquired by having the vibrator and imager downhole enabled the customer to see potential hazards ahead of the drill bit and mitigate drilling risk. The DAS technology reduced operating time to 30 minutes compared with conventional VSP acquisition that can require up to eight hours.
Offshore the UAE, Testing & Process deployed a combination of technologies for Al Hosn Gas in the Hail and Gasha fields. The combination included an eFire-TCP* tubing-conveyed perforating electronic firing head and new perforation correlation technology, both enabled by Muzic* wireless telemetry. The wirelessly-enabled depth correlation was consistent with the traditional wireline gamma ray and casing collar locator method. In addition, real-time downhole data helped determine reservoir properties, assessed well performance during and after stimulation, and supported downhole sampling decisions to reduce the original well test program by 18 hours.
The transformation program enabled reductions in equipment numbers and tool reliability repair costs for Schlumberger by using Technology Lifecycle Management (TLM). In Saudi Arabia for example, Schlumberger at its Middle East Center for Reliability and Efficiency (CRE) in Dhahran implemented a new maintenance system for Testing & Process Services that decreased the overall cost of equipment repair by 48% and improved turnaround time by 21% in the first three months of operations. In Australia, WesternGeco deployed its newly developed eSource marine seismic energy source on the Amazon Conqueror for a multiclient survey. TLM methodology delivers seismic source reliability improvements for all WesternGeco sources including the eSource project which is using an acquisition technique that depends on high source reliability to ensure maximum operational efficiency. From 2014 to 2016, the reliability of WesternGeco sources improved 47%.
Drilling Group
Drilling Group revenue of $2.0 billion, of which 76% came from the international markets, was flat sequentially as the continued strong directional drilling activity in North America land was offset by lower drilling activity in the International Areas. The improvement in North America revenue came from increased uptake of Drilling & Measurements, Bits & Drilling Tools, and M-I SWACO products and services. The decreased revenue in the International Areas was due to completed Drilling & Measurement and IDS projects in India and Iraq, while the winter slowdown in Russia and Norway affected Drilling & Measurements and M-I SWACO activity.
Pretax operating margin of 12% expanded 81 bps sequentially despite revenue being flat. This was due to pricing improvements from greater uptake of drilling technologies on increasing activity on land in the US which mainly affected Drilling & Measurements and Bits & Drilling Tools. Margin also expanded as a result of operational execution in IDS, M-I SWACO, and Bits & Drilling Tools and through continuing transformation-related benefits as resources were aligned to match the shape of the recovery.
A combination of IDS projects, contract awards, new technology deployments, and transformation efficiencies contributed to Drilling Group performance in the fourth quarter.
In the Gulf Cooperation Council (GCC) region, IDS delivered a 40% drilling performance improvement in the first three quarters of 2016 compared with non-integrated drilling services in similar fields. The improvement is based on the feet drilled per hour below the rotary table. This achievement was enabled by a combination of drilling technologies, such as PowerDrive Archer* high build rate and PowerDrive Xceed* ruggedized rotary steerable systems to optimize drilling times in horizontal wells and during extended reach drilling. This included the use of RigHour* multiwell drilling operational efficiency analysis, and ROPO* rate of penetration optimization software, which adjusts drilling parameters to maximize on-bottom drilling performance. Schlumberger combined these technologies with integrated workflows overseen by multidisciplinary domain experts in the Saudi Arabia and Abu Dhabi Drilling Technology Integration Centers to reduce both drilling and overall development costs.
In Norway, Statoil awarded Schlumberger an eight-year contract with optional periods to deliver integrated well construction services for one of its Cat-J jackup rigs being built for operations in the harsh environments and shallow wells of the Norwegian Continental Shelf. Schlumberger will provide planning and execution for directional drilling, measurement- and logging-while-drilling, mud logging, drilling and completion fluids, cementing, pumping, slot recovery and fishing, electrical wireline logging, waste management, completions, downhole mechanical isolation, mechanical well wash and tubing-conveyed perforating for the Gullfaks satellites field with operations planned for start-up later this year.
In the Norwegian sector of the North Sea, Drilling & Measurements used the GeoSphere* reservoir mapping-while-drilling service for ExxonMobil to map a complex injectite reservoir and effectively geosteer into target sands in the Balder field. Given two goals—avoid costly pilot holes in development wells that often failed to provide sufficient information to help land the producer wells and avoid setting the casing in thin injectite sands—GeoSphere technology mapped the top of the massive sands from more than 20 m total vertical depth above and detected the oil/water contact while landing the 12 ¼-in section before penetrating the reservoir. For the 8 ½-in reservoir section, the customer was able to plan a geosteering strategy ahead of the bit by combining seismic interpretation and GeoSphere mapping results, and thus increased the productivity of the wells.
In West Texas, Drilling & Measurements used a combination of technologies to establish a new record in drilling performance for an operator in the Permian basin. The bottomhole assembly included PowerDrive Orbit* rotary steerable systems to optimize directional drilling and a DynaForce* high-performance drilling motor, which provides the highest torque at the bit and outperforms conventional motors in high-volume drilling. In addition, SlimPulse* retrievable MWD service provided direction, inclination, toolface, and gamma ray measurements in real time for mud-pulse telemetry. The customer drilled a 7,814-ft lateral in less than 22 hours, which surpassed the customer’s previous footage record in the Permian basin by 47%. As a result, the customer reduced drilling time by 18 hours compared with a previous lateral.
In Ecuador, a Drilling & Measurements PowerDrive*X6 rotary steerable system with customized Smith PDC bit technologies was deployed for Orion Energy to improve drilling performance in a well in the Ocano field. With remote support from experts at the Drilling Technology Integration Center, the operations team drilled 6,400 ft of the 16-in well section in 30 hours, increasing the rate of penetration (ROP) to 201 ft/hr compared with 136 ft/hr in similar wells, a 48% net increase. As a result, the customer saved approximately $100,000 in drilling costs by completing the well section two days earlier than originally planned.
In Egypt, Drilling & Measurements used the GeoSphere* reservoir mapping-while-drilling service for Belayim Petroleum Company (Petrobel), a joint venture between Egyptian General Petroleum Corporation and IEOC Production B.V., to eliminate a pilot hole in the Abu Rudeis field. An unconformity at the top of the oil-bearing sandstone initially required a pilot hole to determine intermediate casing depth while pressurized shales above the target zone required a high mud weight that made penetration of the target sand challenging due to potential mud circulation losses. GeoSphere technology used deep directional electromagnetic measurements to reveal subsurface bedding and fluid contact details more than 100 ft from the wellbore, which helped manage the geological uncertainty and drilling risk. By eliminating the pilot hole, the customer saved approximately $1.8 million.
In Russia, Bits & Drilling Tools used a combination of drillbit technologies for LLC LUKOIL-Komi, a subsidiary production enterprise of PAO LUKOIL, to eliminate four bit trips and increase the ROP in an offset well in the Kyrtaelskoye field in the Timano-Pechora region. ONYX 360* rolling PDC cutter technology increased bit durability due to its 360° of rotation while Stinger* conical diamond elements provided superior impact strength and wear resistance in this hard and highly abrasive sand formation. In addition, due to its modular design, the Drilling & Measurements PowerPak* steerable motor was customized to the drilling environment. As a result, the customer achieved an average ROP of 9.3 m/h, a 40% increase compared with the maximum ROP achieved in offset wells. Furthermore, the customer saved five days of operations by drilling the 8 5/8-in section in 15 days instead of the expected 20 days.
In the Neuquén basin in Argentina, M-I SWACO used KLA-SHIELD* enhanced-polymer water-base drilling fluid for Wintershall Argentina to drill a 3,281-ft lateral in a challenging formation defined by abnormally high pore pressure, natural fractures, stresses, and general geomechanical complexity. The KLA-SHIELD system optimized with STARGLIDE ROP-enhancing lubricant and DRILZONE rate-of-penetration-enhancing antiaccretion additive, provided an alternative to non-aqueous drilling fluids. In addition, VIRTUAL HYDRAULICS* drilling fluid simulation software traced the well trajectory, performed torque and drag simulations, evaluated the rheology in terms of equivalent circulating density, and optimized hole cleaning. The customer benefitted by drilling the well and lateral in 70 days without any caving, swelling, or tight wellbore issues.
The transformation program enabled an increase in reliability and efficiency as well as product and service delivery. Design, engineering, and maintenance teams in Drilling & Measurements at the Middle East CRE in Dhahran, Saudi Arabia, collaborated to create ruggedized modular housings for measurement-while-drilling tools and decrease their susceptibility to movement and wear in a high-shock environment. As a result, the reliability of ImPulse* integrated MWD platform tools increased 240% and the reliability of adnVISION* azimuthal density neutron service tools increased by 47% in the first six months of the CRE’s operation.
Production Group
Production Group revenue of $2.2 billion, of which 72% came from the international markets, was 5% higher sequentially from strong fracturing activity on unconventional resource developments on land in the Middle East, mainly in Saudi Arabia, and in North America where the land rig count and fracturing stage count increased. Revenue on land in the US increased both on volume and on a modest pricing recovery. Revenue in Western Canada grew from a seasonal winter ramp-up in activity in addition to higher sales of artificial lift products. Cementing revenue was up 30% mostly in North America and IPS grew three-fold primarily in the International Areas.
Pretax operating margin of 6% increased 134 bps sequentially on increased activity, which drove efficiency and better operational execution in the Middle East. The modest pricing recovery on land in the US also contributed to the margin expansion.
Production Group results benefitted from contract awards, new technology deployments, and transformation initiatives to improve operational efficiency during the quarter.
The Kuwait Oil Company awarded Schlumberger a contract for the supply and installation of ResFlow* inflow control devices to be used in sandstone reservoirs and in a 140-well carbonate development project. ResFlow technology helps maintain uniform inflow rates across the entire interval in openhole completions, even in the presence of permeability variations and thief zones. These two technically challenging developments require reliable equipment that can operate in complex wells in order to control and understand reservoir behavior.
In China, Well Services used a combination of technologies for the Schlumberger-CoPower joint venture to overcome a tight, under-pressurized gas reservoir in the Ordos basin. FiberFRAC* fiber-based fracturing fluid technology created a fiber network within the fracturing fluid, providing a mechanical means to transport and place the proppant. In addition, composite fluid from BroadBand* unconventional reservoir completion services minimized potential screenouts and optimized proppant distribution. The customer achieved an average production of nearly 2,280 Mscf/d for 11 wells compared with six offset wells that used conventional fracturing fluids and had an average production of 812 Mscf/d.
In the UAE, Well Services HiWAY* flow-channel fracturing technique and UltraMARINE* seawater-base fracturing fluid were deployed in an offshore environment to stimulate low-permeability, high-stress source rock for Dubai Petroleum. Eight proppant fracturing jobs were successfully placed with over half a million pounds pumped. These are the first multistage, offshore source rock hydraulic fracturing treatments done in the world, and the eight jobs were completed in 40 hours.
In Ecuador, Well Services used the Invizion Evaluation* well integrity service for Consortium Shushufindi to overcome wellbore integrity challenges in the Shushufindi field. The integration of multiwell data using the Techlog* wellbore software platform enabled Invizion Evaluation technology to identify post-placement channeling and differential crossflow between target sands. After optimization of the original drilling program with improved cement formulation and additives, the well showed no sign of post-placement channeling. As a result, the customer avoided potential remedial operational costs equivalent to $450,000.
Offshore Indonesia, Schlumberger used the MZ-Xpress* system for performing multizone fracturing and gravel packing for ENI on the Jangkrik project. Two MZ-Xpress systems were each installed in a single trip to provide multizone sand control in a well featuring five producing layers across two different casing sizes. The customer saved approximately 6.5 days of rig time over four zones of completion, equivalent to $5.1 million in cost savings.
In North America, the transformation enabled decreases in the cost of asset ownership and improved operating efficiencies for Well Services. To optimize the inventory of materials and supplies, a new Supply Planning organization analyzed spend data to ensure stock is on hand for commonly used items and maximized sharing opportunities. In June 2016, only four months after its creation, the organization reduced stock on hand by 20%. Moreover, the use of Logistics Control towers that centralize management and delivery of field supplies, such as proppant for hydraulic fracturing operations, minimized costs for operating locations by conducting all of the planning, tactical sourcing, and purchase-order generation to ensure cost-effective service delivery of proppant to the field. Since opening in late 2014, these control towers have saved the Company $250 million in trucking costs.
In North Texas, the transformation enabled Well Services to improve tool reliability and reduce maintenance costs. The CRE in Denton implemented prognostic health management (PHM), using real-time pump data collected from field locations. During the six months after implementation, PHM achieved an estimated $6 million of savings in operation costs.....
Contacts
Schlumberger Limited
Simon Farrant – Schlumberger Limited, Vice President of Investor Relations
Joy V. Domingo – Schlumberger Limited, Manager of Investor Relations
Office +1 (713) 375-3535
investor-relations@slb.com
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